Gazprom Cuts 2013 Gas Export Price Forecast Amid Contract Talks

June 4 (Bloomberg) -- OAO Gazprom sees its average price
for Europe dropping for the first time in four years as
customers win additional concessions from the world’s biggest
natural-gas producer and oil prices ease.

Gazprom will charge European clients an average $370 to
$380 per 1,000 cubic meters this year, compared with $402 per
1,000 cubic meters last year, Deputy Chief Executive Officer
Alexander Medvedev told reporters today at the company’s Moscow
headquarters. Rising volumes will support revenue, he said.

European buyers including EON SE and Eni SpA have been
pressuring the state-controlled exporter for discounts since its
average gas price reached a record in 2008 while a recession cut
demand for the fuel and made gas available at reduced market
prices. Gazprom, which supplies about a quarter of Europe’s gas,
sells the fuel under multi-year contracts linked to crude and
oil-product prices with a time lag of six to nine months. Brent
has fallen about 8 percent this year.

“The two factors are playing a role,” Medvedev said.
“Retroactive payments for ongoing talks won’t exceed about $800
million to $900 million,” excluding any discounts for Germany’s
RWE AG, he said.

The Russian gas exporter expects to conclude the current
round of talks on price revisions with most of its “key
partners” by the end of June, Medvedev said. The majority of
its contracts will be renegotiated via talks, he said.

Eni, GDF

Gazprom is talking with Eni, GDF Suez SA, and EconGas,
Medvedev said. It remains in arbitration and in talks with RWE.
Gazprom’s German ventures WIEH and Wingas were also
renegotiating supply terms with Gazprom after contracts became
eligible for review this year, Sergei Chelpanov, Gazprom
Export’s deputy chief, said on a Jan. 17 conference call.

Gazprom plans to cut the price by less than the average it
agreed to in the previous round of talks, Medvedev said. Last
year, the gas producer agreed to a reduction of about 7 percent
to 10 percent for clients including EON and GDF, after
consecutive increases on an annual basis since 2009.

Gazprom didn’t increase the role of spot pricing in
renegotiations that included revisions of the existing price
formula, Medvedev said. The share of spot-indexed contracts
doesn’t exceed 7 percent to 8 percent in the total contract
portfolio.

Export Revenue

Export revenue will probably rise to about $57 billion this
year from $56 billion in 2012, Medvedev said. Volumes to Europe,
including Turkey and excluding the Baltic countries, will
increase by 10 percent to at least 152 billion cubic meters this
year, he said. Russian gas exports to Europe in the first five
months of this year were supported by colder weather.

Gazprom, which is seeking to increase its presence in
global liquefied natural gas trade, is studying a new project in
the European part of Russia, Medvedev said. Studies on expanding
the Sakhalin-2 LNG plant, Russia’s only existing project to turn
gas into a liquid for transportation, will be completed this
month, Pavel Oderov, head of Gazprom’s department for foreign
business, said today.